Healthy Skepticism Library item: 18646

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Publication type: news

Larkin C
Allergan Will Pay Fine, Plead Guilty to Misdemeanor
Bloomberg.com 2010 Sep 2
http://www.bloomberg.com/news/2010-09-01/allergan-will-pay-600-million-plead-guilty-to-misdemeanor-in-botox-probe.html

Full text:

Allergan Inc., maker of the wrinkle smoother Botox, agreed to pay $600 million and plead guilty to a misdemeanor in settling a U.S. investigation of its marketing practices.

Allergan will pay $375 million to the government as part of a “misbranding” charge that the marketing of Botox from 2000 to 2005 led to use in treating headache, pain, muscle stiffness and juvenile cerebral palsy, purposes for which the Food and Drug Administration during that time hadn’t approved marketing. Allergan will also pay $225 million to resolve civil claims from the Justice Department, the company said today in a statement.

The global settlement concludes a two-and-a-half year investigation that analysts have said has held up FDA approval for treatment of migraines. Botox, Allergan’s top product with $1.3 billion in annual sales, may generate an additional $1 billion with use in migraines, according to Aaron Gal, an analyst at Sanford C. Bernstein & Co. in New York.

“The resolution removes an overhang/concern for investors,” Larry Biegelsen, an analyst at Wells Fargo Securities in New York, said in a note to clients today. “The $600 million settlement amount appears reasonable based on industry standards.”

Allergan rose $1.67, or 2.7 percent, to $63.09 at 1:41 p.m. in New York Stock Exchange composite trading. Before today, shares of the Irvine, California-based company had fallen 2.5 percent this year, compared with a 8.4 percent decline in the 11-member Standard & Poor’s 500 Pharmaceuticals Index.

Dropping a Lawsuit

Allergan said it expects that the FDA will decide this year on the company’s application for clearance to market Botox for use in migraines. The company was required as part of the agreement to drop the lawsuit it filed against the FDA in October challenging a government rule that prohibits companies from marketing products for unapproved uses, also known as “off-label” promotions.

“This is a good outcome that protects the American people,” FDA Commissioner Margaret Hamburg said today in a briefing with reporters in Washington. “The off-label promotion of drugs threatens public health and the regulatory framework of the FDA.”

Allergan said it expects to report $610 million to $615 million in pretax costs associated with the settlement and certain lawyers’ fees for the current third quarter and anticipates other charges in the fourth.

The company also agreed to a five-year compliance plan under which it will disclose payments to doctors on its website and have senior executives and board members annually certify that divisions meet federal health-care requirements.

The civil penalties will be divided between federal and state health plans that were billed for unapproved uses of Botox, and five whistle-blowers who filed lawsuits in Georgia under the False Claims Act, the Justice Department said.

Allergan “made it a top corporate priority” to maximize sales of unapproved uses of Botox by coaching doctors how to bill insurers, doubling the size of its reimbursement team, and directing workshops focused on these uses, said Sally Yates, the U.S. attorney for the Northern District of Georgia, at the press briefing.

The drugmaker said in its statement that the settlement “is in the best interest of our stockholders” and avoids “the substantial risks to Allergan associated with government enforcement action in these matters.”